IHH: Healthcare Sector Outlook Strengthens on Margin Improvements, Target Price Raised

Financial analysts have reiterated a “BUY” recommendation for a leading diversified healthcare provider, raising its target price to MYR9.52. The revised outlook reflects an improved margin forecast and disciplined operational execution, despite expectations of slower constant currency growth in the coming years.

The investment bank has revised its earnings forecasts for 2025F-2027F upwards by 4%, 2%, and 2.7% respectively. This positive adjustment primarily stems from a more optimistic view on future margins, though partially offset by anticipated foreign exchange assumptions. The group’s resilient earnings base is underpinned by its disciplined execution, strong regional footprint, and a strategic focus on a more affluent patient mix, including higher-equity cases and medical tourism.

Performance Review

While the group is projected to achieve low-to-mid teens constant currency growth in revenue and EBITDA for 2026, this marks a moderation from approximately 18% in 9M25. Reported growth could also be tempered by translation losses due to a stronger Ringgit. Structural momentum, particularly from foreign patients and the increasing adoption of daycare/ambulatory care centre (ACC) formats, are key drivers. Malaysia is highlighted as a strong growth area, while India continues its margin convergence trajectory. Singapore’s performance, however, is expected to normalize, with its recovery dependent on the ramp-up of facilities like Mount Elizabeth Orchard, alongside some lingering “payer noise.”

Challenges and Risks

Key risks identified by analysts include weaker-than-expected economic growth, which could dampen patient volumes. Aggressive cost inflation across operating markets poses another challenge, especially if the group is unable to effectively pass through these cost increases to patients. Furthermore, foreign exchange volatility remains a concern, potentially leading to further translation losses.

Future Outlook and Recommendation

Given the updated assumptions and a refreshed sum-of-parts (SOP) valuation, the target price has been increased to MYR9.52 (from MYR9.14 previously), representing a 9.9% upside from the last traded price of MYR8.66. The recommendation to “BUY” is maintained, reflecting confidence in the company’s ability to navigate market challenges through its diversified earnings base and strategic operational focus. The new target price implies a 16.7x 2026F EV/EBITDA, positioning it at +2.6 standard deviations from its 5-year historical average.